National Board of Revenue has formed a committee to examine a proposal of Bangladesh Investment Development Authority for providing VAT exemption on purchase of all raw materials and services used in production of export goods.
The committee will submit a report with recommendations on how to ensure value-added tax exemption to export-oriented industries on procurement of all types of raw materials and services for producing export goods.
BIDA’s recommendation came at a joint meeting on elimination of constraints behind attracting investment held at NBR in July last.
NBR constituted the body, headed by VAT Audit, Intelligence and Investigation Directorate director general AFM Abdullah Khan, on December 19 as per decision of the joint meeting.
Currently, there is no VAT on export of goods and services but exporters have to pay the tax for many raw materials and services on import or procurement from local market.
The raw materials and services are used in production of export goods.
NBR officials said that most of the raw materials and services were VAT-free for export-oriented industries.
Manufacturers and exporters also can take back the VAT paid on import or procurement of raw materials and services, like transportation cost, on which VAT is applicable.
BIDA recommended that NBR provide VAT exemption for all raw materials and services related to export of goods.
The committee consists of representatives from Duty Exemption and Drawback Office, Customs Excise and VAT Commissionerates, Dhaka North and Dhaka South, will hold meetings every month and make recommendations on the issues evaluating all aspects, according to the decision of the joint meeting.
It will also observe the production process of export-oriented industries and evaluate the local value-addition to recommend VAT rebate against purchase of raw materials and services for which exporters now can’t avail rebate.
A senior NBR official said that the revenue authorities responded with the proposal of BIDA to create an investment enabling environment in the country as well as to facilitate smooth export activities.
NBR would scrutinise the pros and cons of existing situation related to VAT on export-oriented industries, particularly major and potential sectors and take steps in line with the findings, he said.
Currently, 100 per cent export-oriented industries having bond licences do not pay VAT on import of raw materials and enjoy VAT exemption on purchase of most of services from local market while partial waiver on some other services.
On the other hand, manufacturers who do not have bond licences get rebate on paid VAT on import or local procurement. In all cases, manufacturers must export the goods produced using the raw materials and services.
Exporters have also been demanding VAT exemption arguing that there is no need to collect VAT from the sector as NBR ultimately pays back the VAT.
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